So what's going to burst the housing bubble? Prices have risen and risen over the past couple of years, to the point where many first-time buyers are finding themselves priced out of the market. In the late 1980s we laughed at tales of people in London paying outrageously large prices for extraordinarily small properties. Now London circa 1987 has come to a suburb near you.

There are few enough signs that the increase in house prices is feeding through to push up the general rate of inflation. Recent figures have suggested some pick-up in the consumer price index, but the Irish rate remains towards the bottom of the EU league. This does not mean, of course, that higher house prices are not increasing the cost of living for those entering the housing market. It is just that this has yet to feed through to a general increase in inflationary pressure. London's property price spiral was reversed by an increase in interest rates, as the conservative government battled to curb the inflationary spiral started by the Lawson boom. But, crucially, no such medicine can now be administered in Ireland.

The advent of the euro means that the Central Bank can only sit and watch as interest rates here fall over the balance of the year, with the average cost to borrowers likely to fall by at least 1.5 percentage points. This is because short-term interest rates here will have to be equal to the lower levels now prevailing in Continental Europe by the time the euro is created in January 1999. Despite the recent push up in rates on the Dublin money market, a reduction in borrowing costs here cannot be too far off.

The fall in interest rates will underpin house prices at current levels and perhaps push them yet higher. Perhaps more importantly, the idea is building in the minds of the public that we are now entering a prolonged era of low interest rates.

Whether this is correct or not remains to be seen. But this expectation of a future of low borrowing costs has restored the confidence in the market, which was temporarily shattered by the 1992/1993 currency crisis. Together with an element of fear - if we don't get into the market now we never will - rising employment, and an increase in the population of house-buying age, have fuelled demand for houses which in turn has pushed prices higher.

The reasons why the supply of housing is restricted are also well researched at this stage. The shortage of supply of serviced land means that the number of houses being built is simply not keeping up with the demand. And, as first year economics teaches, when demand for something greatly exceeds supply, then the result is rising prices.

It is easy to argue that houses now cost "too much". And perhaps they do, although some experts argue convincingly that we are now moving towards a Continental EU-type situation where home-ownership is rare for younger couples and a much higher percentage of the population rent their homes. But if prices have risen too far too fast it is very difficult to see what will bring them downwards, in the short term at least. The situation facing policy makers in the housing market is perhaps the clearest illustration of how the economic rules of the game are changing as we head towards the euro zone. In the past, a sharp rise in house prices such as we have seen would already have prompted the Central Bank to push up interest rates significantly. This would have cooled demand and led to an easing in house prices.

But even though the euro does not come into being until next January, we have already lost control of our own interest rates. Thus the chief weapon which policy makers would have used to target the housing market has already been disarmed. And even if interest rates start to rise once we join the euro-zone, they will only do so gradually and from a low base, unless the new currency fails completely to gain credibility on the international markets.

There is no other way to limit the overall supply of funds to borrowers. The best the Central Bank can hope to do is try to ensure that banks and building societies adhere to reasonable lending criteria and it is questionable how successful they can even be in doing this.

Overall controls on the amount of credit available have no place in a modern economic world where capital can flow freely across international borders.

Measures to increase the supply of land for housing may also be considered and are - no doubt - being studied in a report for the Government being compiled by consultant Peter Bacon. But any policy moves in this area will be slow to affect the overall market.

So if the economy continues to steam ahead, so will the housing market. And the only thing which it would appear could really knock the market back once we enter the euro is either an unexpected rise in interest rates across Europe or, more likely, an overall slowdown in the economy. The real danger to the housing market would be if the economy were to slip back into a sustained period of low growth, which - by hitting demand for houses - would lead to a nasty and prolonged period of attrition in the market.

For the moment, such is the steam built up in the economy and the strength of the demographic support of a rising young population - that it is hard to see anything bursting the property bubble over the next year or so.

And beyond that, those taking out hefty mortgages can only cross their fingers and hope that the economy can continue to perform and that they will not be left in five years time in the negative equity trap - where the property value is less than the remaining mortgage on it.